Price paid to British farmers for meat dives 12.5% in a year: Small food producers are the casualties of price war at the checkout

Small food producers and farmers have emerged as the first casualties of the supermarket price war, with warnings of plunging returns.

The average price paid to farmers for meat has slumped by 12.5 per cent over the past year, according to the National Farmers’ Union. However, it claims the fall has not been passed on to consumers, but is instead being used to pay for discounts on other products.

At the same time, accountants advising small companies that are in difficulty are already seeing a rise in cases of financial trouble among suppliers to the big grocery chains.

Under pressure: Average farm gate beef prices have dropped to about £3.50 a kilo from £4 a year ago

Supermarkets including Tesco, Morrisons and Asda have collectively announced billions of pounds in price cuts as they are squeezed by upstart rivals such as Aldi and Lidl.

Surveys of consumer spending continue to show that households, which have suffered from years of below-inflation wage rises, are seeking out bargains.

Charles Sercombe, NFU livestock board chairman, said retailers are ‘taking advantage and putting unnecessary strains on British farming’. He said he was doubly surprised after the horsemeat scandal last year led many supermarkets to pledge to take greater care in getting meat from traceable sources.

‘All we heard after Horsegate last year was they wanted to build lasting relationships with farmers. But retailers have failed to back British farmers and our 55,000 members and our livestock farmers are furious,’ he said.

Average farm gate beef prices have dropped to about £3.50 a kilo from £4 a year ago, in part because consumers are eating less meat.

But the NFU said prices paid by shoppers in stores have not fallen. It has calculated that in the past four months, supermarkets have taken an extra 62p for every kilogram of beef sold for themselves, which they can use to subsidise price cuts on other products such as milk and bread.

Duncan Swift, a business recovery adviser to food supply and processing companies from accountancy firm Moore Stephens, said farm gate prices were part of a wider problem facing retail suppliers. ‘I’m already seeing suppliers becoming financially distressed as supermarkets look at more ways to reduce their prices and I’m expecting to see more as this year progresses,’ he said.

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‘This price war is an effort by the supermarkets to ensure their own survival and is helping to create a perfect storm for suppliers,’ he added.

The claims come as the Groceries Code Adjudicator – the watchdog set up last year to monitor the supermarkets’ treatment of small suppliers – has launched a survey to find out whether that treatment has improved or worsened during the past 12 months.

Christine Tacon, the head of the adjudicator, said: ‘There is nothing wrong with retailers asking their suppliers for help to make sure they are as competitive as they can be. I’m not here to make sure suppliers get more money.

‘But I am here to make sure they get treated fairly and that retailers are acting within the terms of their contracts and within the Groceries Code.’

The results of the Groceries Code Adjudicator’s survey are expected to be revealed at its conference next month.

You can find the GCA’s survey at: gov.uk/government/news/groceries-suppliers-tell-us-what-you-think.